Facts of the case

The 1990 amendments to the Clean Air Act require that the Environmental Protection Agency (EPA) regulate electric utility steam generating units (EGUs) if it finds that such regulation was "appropriate and necessary" after conducting a utility study. In December 2000, the EPA issued a notice that such regulation was necessary based on the results of the utility study, which showed that the mercury emissions from EGUs were a threat to public health. In 2005, the EPA reversed its findings and determined that it was not "appropriate and necessary" to regulate coal-and oil-fired EGUs. States and other groups petitioned for review, and the U.S. Court of Appeals for the District of Columbia Circuit held that the EPA's attempt to reverse its findings was unlawful because it could not remove pollutant sources from the regulation list once they were on it. In 2012, the EPA confirmed that EGU regulation was necessary and promulgated emission standards. State, industry, and labor groups petitioned the appellate court for review of the EPA's interpretation of the "appropriate and necessary" requirement with respect to these regulations. The appellate court denied the petition.

Question

Did the Environmental Protection Agency unreasonably refuse to consider costs in determining whether it was appropriate to regulate electric utility steam generating units?

Media for Michigan v. Environmental Protection Agency

John G. Roberts, Jr.:

Justice Scalia has our last opinion this term in Case 14-46, Michigan v. EPA, and the consolidated cases.

Antonin Scalia:

These cases are here on writs of certiorari to the United States Court of Appeals for the District of Columbia Circuit.

They concern whether the Environmental Protection Agency must consider the costs of regulation before imposing air pollution regulations on power plants.

The Clean Air Act establishes a series of regulatory programs to control air pollution.

One of these schemes, the Hazardous Air Pollutants Program, targets emissions of hazardous air pollutants from stationary sources, such as factories and refineries.

The Act establishes one set of procedures governing the program's application to power plants and a different set of procedures governing its application to other sources.

A source other than a power plant is covered by the program if its annual emissions exceed a specific numerical threshold, or if EPA finds that its emissions threaten human health or the environment.

Power plants by contrast are covered by the program only if the agency finds that, these are the words of the statute “regulation is appropriate and necessary”.

Once one of these power plants become subject to the program, the agency is required to impose certain minimum emissions regulations upon it.

After conducting a study into emissions from power plants EPA decided to regulate them under the Hazardous Air Pollutants Program.

It found regulation appropriate within the word of the statute because, number one, power plants emissions posed risks to human health and the environment; and two, controls were available to reduce those emissions.

It found regulation necessary, the other condition in the statute, because the imposition of other Clean Air Act requirements would not suffice to eliminate those risks.

EPA did not however consider the costs of compliance when making this decision.

According to the agency's own estimates, the pollution regulations that were ultimately imposed will cost power plants $9.6 billion a year, all of which will be passed on to the consumers of electricity of course, but will reduce emissions of hazardous air pollutants by only $4-6 million a year.

In other words, the costs were about 2,000 times greater than the benefits.

Petitioners, who include 23 states, sought review in the DC Circuit, claiming that EPA was required to consider cost.

The Court of Appeals upheld the agency's decision and we agreed to hear the case.

It is not enough for the agency's decreed result to be within the scope of its lawful authority.

The process by which it reaches the result must be rational and include consideration of the relevant factors.

Here EPA interpreted the phrase appropriate and necessary to mean that cost is not one of the relevant factors.

Under familiar principles of administrative law, the administrative agency's interpretation prevails, so long as it is reasonable, even if it is not the best reading of the statute.

In our view, EPA's interpretation is not reasonable.

One does not need to open up a dictionary to realize that appropriate and necessary is a capacious phrase; read naturally it requires at least some attention to cost.

One would not say that it is even rational, never mind appropriate, to impose billions of dollars in economic costs in return for a few dollars in health or environmental benefits.

Moreover, cost includes more than the expense of complying with the regulation.

Any disadvantage could be termed a cost.

EPA's interpretation precludes the agency from considering any kind of cost, including harms that the regulation might do to human health or the environment.

For example, if emissions from power plants harm human health, but the technologies needed to eliminate those emissions harm human health even more, the government concedes that it would still deem that regulation was appropriate.

But no regulation is appropriate if it does significantly more harm than good.